ITV a takeover target after Adam Crozier oversees dramatic turnaround

Charlotte Henry is a former City A.M. reporter. She is the author of the upcoming book Not Buying It, a look at fake news and how to solve it, to be published by Unbound where you can pledge and buy the book.

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Mr Selfridge, starring Entourage’s Jeremy Piven, has been a hit for ITV

Charlotte Henry watches a positive programme at ITV, unlike a few years ago. No wonder that takeover talk persists.

In a conference centre in Westminster, some of ITV’s shareholders have assembled for the company’s annual general meeting (AGM). They broadly welcomed the progress of the share price, their positivity no doubt boosted by a dividend which is up 46 per cent year-on-year.

Meanwhile, a couple of miles away in the City, speculation is buzzing over whether the broadcaster’s turnaround makes it an attractive takeover target from a big media company.

Under the leadership of chief executive Adam Crozier, ITV has built up its production ability by taking over smaller companies. This has increased its ability to create original programming, which is attractive to potential buyers.

The firm also continues to have mass market appeal. In 2014 ITV delivered 99 per cent of all commercial audiences of over five million viewers – no mean achievement in such a fragmented market.

It has also held its position in the UK television advertising market over the last few years. In 2014 it took 45.9 per cent of the market, compared to 44.7 per cent in 2009.

It all leads to significant takeover rumours. Liberty Global, the company behind Virgin Media, may have denied it was going to bid for the broadcaster at the end of March, but the speculation is not dying down.

One City source told City A.M. that a takeover by someone is “definitely on the cards”, and that ITV has various assets that people would want, and a strong position in the UK market.

The source indicated that if not Liberty, then Vivendi could be a potential buyer, noting “they’ve got cash”.

Analysts are broadly positive on the back of the yesterday’s results. Numis upgraded its target price for the stock, although slightly downgraded its rating from “buy” to “add”. Liberum also remained positive, reiterating its “buy” rating.

The broadcaster’s recent success is all the more sweet as ITV had previously been labelled a failing company, riddled with debt and ripe for the picking. No longer. It yesterday announced profit before tax of £712m, and has a market cap of over £10bn.

Another big programming signing to keep up the ratings when Downtown Abbey ends after this series, and to sit alongside other uber-hits like the X-Factor, could help push ITV even further forward.

At the AGM, the focus was more on whether the current incarnation of ITV can continue to make progress and compete, not whether it would come under new ownership.

The board was questioned about how it can compete in the ultra-competitive area of sports broadcasting. Crozier pointed out that ITV broadcast every England game exclusively. On domestic football, he said the recent deal between Sky and the Premier League for broadcasting rights was “fairly astronomical”, adding “it’s not a contract we could, or would even want to, compete for”.

The former Football Association chief executive also pointed out that ITV has exclusive rights to the Rugby World Cup. Although Crozier’s dismissal of Scotland’s prospects is unlikely to go down well when he returns to his homeland, the tournament is likely to be a huge hit for the broadcaster, not to mention an advertising boom.

It’s not all positive though. As delegates entered the AGM venue, they were greeted by union representatives, campaigning on behalf of around 200 ITV staff who were on strike yesterday over pay.

In the meeting, chair Archie Norman determinedly tried not to antagonise the situation further, saying: “the union members are part of our family.” Crozier also emphasised conversation with the union was ongoing.

He commented after the meeting: “We try and take a fair and balanced approach. Over the last five years we’ve improved people’s pay by 13.5 per cent, against the private sector of 6.4 per cent, against the public sector of 4.6 per cent.” He said this rise, and also £1,200 annual bonuses, had come “despite being in the teeth of a recession.”

Crozier and his colleagues on the board remain clear the turnaround mission is not complete. It is very possible that the cliffhanger ending in this story will see ITV taken over.